While employee count often correlates with revenue, growing your company isn’t as simple as hiring more staff. Having too few employees means staff are overworked and forced to underdeliver while having too many could bloat your operating costs and shrink profits.

In between is the “Goldilocks zone”, where your team produces the maximum output at the lowest expense. Here are five things to consider to help you strike the ideal balance.

1. Have you got clearly defined existing roles and responsibilities?

When a business starts with a handful of employees, an organisational chart can feel a bit pointless. Founding members typically have diverse skillsets, which means they spread their efforts across multiple roles and disciplines.

As the company grows and new employees join the team, the same ad hoc approach can persist. After a while, employees’ contributions can blur, which means it’s difficult to determine if there are ways to "work smarter" before hiring new people.

An organisational chart with all roles and responsibilities clearly laid out can help you assess the team structure from a fresh perspective. Try to connect challenges (e.g. delayed orders, customer complaints, excessive overtime) to the relevant branch or sub-team in the chart. Would additional support in this area help, or do existing employees need better training or support from the wider team?

2. Is the need to hire driven by burn-out or new business?

Business owners often "sense" a need to expand their teams, but it’s not always clear what’s triggering that instinct. For example, winning a big contract might necessitate hiring in order to deliver the required volume of work or goods. On the other hand, if you’re struggling to fulfill orders, it could be due to operational inefficiencies that are better solved through improved technology or refining your processes than adding new workers.

Critically examine the reasons before you decide to hire. Bringing on talent to fill a critical gap could relieve stress from other team members, but only if that gap is the primary source of stress.

3. Will there be enough work?

What will happen to the graphic designer you’ve brought on board for a new marketing project if you can’t renew the contract six months later? If there isn’t enough work across other clients, you’ll need to let them go (increasing staff turnover and potentially harming morale) or constantly drip-feed small jobs to keep them busy.

Whenever possible, hiring a full-time employee should be part of a long-term growth plan. If you aren’t sure you’ll need someone full-time, can you outsource the work to a third-party or freelancer instead? Doing so could help you figure out if your requirements are short or long-term. Check out our guide to maximising productivity throughout the employee life cycle to make sure you’re getting the most from your current team and new hires.

4. Which role will add the most value?

Sometimes it's obvious that you need to hire a new employee, but the specific role you should be hiring for may not be as clear. For example, imagine that you’re often sidetracked by issues originating in the fulfillment department of your warehouse. Orders slip through the net, busy periods cause bottlenecks, and customers frequently chase sluggish deliveries. Which hire or hires will solve the most issues?

You could hire three warehouse operatives to speed up fulfillment, but perhaps a strategic management hire could make a bigger difference. They could manage your current warehouse workers and solve the logistics problems while also reducing the issues that land on your desk.

So before rushing into hiring for a particular role, try to consider the total cost (including salary, training requirements and company equipment) of adding them to your team compared to the potential decrease in expenses and/or increase in revenue they could bring.

5. How will you measure the ROI of a new employee?

Drawing a line between an employee’s efforts and your bottom line is relatively easy if they’re in a sales position, but the impact of other roles (e.g. creatives, marketers, HR) can be harder to track.

Use KPIs to set targets for individual employees where possible. In a warehouse, picking and packing could be among the most expensive processes because they’re labour intensive. How many orders does your new hire need to process per hour to return a positive ROI?

Other KPIs you could use to assess the value of hiring a new employee might include:

• Number of resolved customer support tickets.
• Number of sales.
• Increased productivity by workers they manage or support.
• Total weekly billable hours logged.